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The 2017 Tissue and Hygiene research, now available to access on Passport, provides latest insights into the industry performance in 2016 and key prospects through to 2021.
KEY RESEARCH HIGHLIGHTS
1. Overall, tissue and disposable hygiene products demonstrate a positive growth trajectory globally, although economic and political headwinds continue to impact demand in a number of markets
2. Adult incontinence once again demonstrates growth above the industry average
3. Competitively priced products gain traction as they respond to the needs of a vast and yet underserved low income consumer base
4. Acquisitions and portfolio realignment on the agenda to ensure long term revenue growth
5. Online retail continues to expand its reach, especially in disposable hygiene products
Positive growth amidst challenging conditions
In 2016, global sales of tissue and disposable hygiene products maintained a positive growth trajectory, despite a number of challenges in the developed and developing regions. Retail sales of tissue and hygiene products grew 2% (constant/real value, USD, 2016 fixed exchange rate). Away-from-home (AFH) tissue products also recorded a 2% increase in value.
The developing regions maintain faster growth, compared to the developed markets, a trend supported by a still significant unmet potential and further product adoption by consumers and AFH users in the emerging and developing countries. At the same time, economic and political strains of 2014/2015 and slow recovery are still felt in markets like Brazil, Mexico, Russia, and a number of others, which is reflected in the still relatively slow pace of growth in 2016 compared to the earlier years. However, further contributing to the slowdown is the growing saturation among middle and upper income earners in the developing markets, with a vast lower income segment in urban and rural areas becoming increasingly important for long term industry growth.
In the developed world, growth in value and volume remains slow for most product categories, with the exception of adult incontinence. While AFH product suppliers face a number of structural changes in the institutional space, retail brands struggle with already high levels of household penetration, changing consumer habits, family planning strategies, demographic shifts, and pricing pressures.
Adult incontinence continues to outperform the overall industry growth
Adult incontinence products continue to see healthy growth across developed and developing markets. In 2016, retail sales of adult incontinence grew 7% in value. Sales in the away-from-home segment increased 3%, supported also by the improving healthcare facilities in the developing regions.
Strong upward trajectory in retail sales is due to a combination of factors, including continuing consumer education, better understanding of incontinence conditions, and improved product availability in store and non-store retail to meet various needs of incontinence sufferers. Importantly, improved dialogue as well as healthcare and marketing campaigns that continue to move away from mere clinical messaging on condition management and focus on lifestyle and product use normalisation to meet the needs of a modern consumer.
Expectations of future category growth are reflected in the companies’ strategies, including acquisitions that help to strengthen the companies’ standing in adult incontinence. For instance, in 2016, Domtar completed two acquisitions: US-based Butterfly brand and also US-based HDIS, an online-only retailer of adult incontinence supplies. The Butterfly brand offers a unique product that responds to the needs of people suffering from ABL (accidental bowel leakage), while HDIS provides Domtar with a successful online distribution platform dedicated to incontinence products.
Affordability increasingly in focus
With a significant portion of unmet potential found in the lower income consumer segment of the developing markets, ensuring a wide range of products at an affordable price becomes increasingly important for the industry’s future growth. As a testimony to the trend, 2016 witnessed further share gains by brands that offered competitive prices and as a result made products more accessible to low income consumers. Examples can be found in markets like Nigeria, where the Turkish Molfix brand of diapers and domestic Lady Care brand of sanitary protection have been gaining share of sales due to a good balance of quality and pricing.
Strong demand for more affordable products to meet the needs of lower income consumers signals increasing diversification and polarisation in the marketplace in the coming years. Value-added premium products will continue to satisfy the demand of the middle and upper income earners. However, focusing on premium alone in product development and marketing can limit consumer reach and undermine future growth potential for a company.
Acquisitions and brand portfolio realignment to support growth
In the increasingly complex global marketplace, acquisitions are among the key instruments for category and geographic expansion. Thus, Ontex continues its search for strategic growth opportunities outside its home base of Western Europe. Having completed the acquisition of Groupo Mabe, the company announced the agreement to purchase the hygiene business of Brazil’s Hypermarcas. Hypermarcas ranks third overall in retail sales of disposable hygiene in Brazil, thereby providing Ontex with a good platform in one of the key growth markets.
At the same time, seeking to improve profitability and focus on categories and brand with better growth prospects, SCA Group exited Mexico’s diapers marketplace. This move follows the company’s previous decision to exit the Brazilian diaper market and re-focus all efforts on a more promising adult incontinence space.
Online retail grows in importance in disposable hygiene
Online retail continues to gain share of retail sales, with particularly notable gains in disposable hygiene products like nappies/diapers/pants and adult incontinence. E-commerce in consumer tissue, while showing growth as well, remains comparatively small, and shipping paper products is not cost efficient. Nonetheless, review of products purchased through, for instance, Amazon Dash Button in the US, placed tissue products among the top sellers, indicative of further opportunities for consumer tissue online retail.
The evolution of e-commerce poses a challenge for many brand manufacturers, as it exposes them to more competition and quick real time price comparisons on the part of consumers, thereby putting more pressure on prices and reducing profit margins. However, staying out of the e-commerce space and not having a dedicated e-commerce strategy in place will hurt the brands in the long term, as the digital space expands and consumers change the way they interact with brands.